Investors Demanded for N2trillion Government Securities in March

Investors demanded for N2trillion worth of government securities in March, a reflection of  the level of excess liquidity in the banking system.

Analysis of trading in government securities(treasury bills) for the month of March revealed that the amount offered by the Central Bank rose by 31 per cent to N762 billion from N584 billion in February.

Demand by investors, or public subscription, jumped by 35 per cent to N2.09 trillion, while the amount sold rose marginally by 0.8 per cent to N902 billion from N894 billion.

However, the amount of treasury bills (TBs) repaid by the CBN dropped by 21 per cent to N512 billion from N644 billion Further analysis revealed that investors showed that while demand for freshly issued TBs, also known as Primary Market Auction (PMA) rose during the month, demand for existing TBs also know as Open Market Operation (OMO) declined.

Demand for OMO bills plunged by 14 percent to N543 billion from N631 billion in February. The amount offered and sold by the apex bank also dropped by 25 percent and 43 percent respectively to N150 billion and N290 billion from N200 billion and N510 billion in the previous month.

Similarly the amount of matured OMO bills repaid during the month dropped by 74 percent to N67 billion from N260 billion. Demand for PMA bills however soared sharply by 59 percent to N1.54 trillion from N914 billion in February. The amount offered and sold by the CBN also rose by 69 percent and 59 percent to NN612 billion from N384 billion.

Also the amount of matured PMA bills repaid during the month rose by 16 percent to N445 billion from N384 billion in February. Recalled that the Monetary Policy Committee (MPC) at its meeting held on March 22nd, 2016 had complained about the amount of excess liquidity in the banking system, saying it is driving demand for foreign exchange, and has the tendency to worsen the rising inflation rate.

The Committee said, “From the monetary data, the Committee noted that the excess liquidity in the banking system was contributing to the current pressure in the foreign exchange market with a strong pass-through to consumer prices. Money market interest rates reflected the liquidity situation in the banking system.

Average inter-bank call and OBB rates, which stood at 0.5 and 2.77 per cent on 25 January 2016, closed at 4.00 and 5.00 per cent, respectively, on March 9, 2016. Between January 25th and end-February 2015, interbank call and OBB rates averaged 1.43 and 2.68 per cent, respectively.